What can I do to prepare for chapter 13 bankruptcy?

Individual debtors including those who are self employed or operate unincorporated business can file under this Chapter. Eligibility is contingent on the fact that the individual's unsecured and secured debts are between certain dollar amounts that are adjusted annually by statute.

Chapter 13 Bankruptcy allows debtors to retain their assets as long as they make payment according to the repayment plan. The repayment plan is supervised by the court. The repayment plan allows the debtor to use future earnings to pay off the debts.

In order to qualify for Chapter 13 bankruptcy, you will have to show the bankruptcy court that you will have enough income, after subtracting certain allowed expenses and required payments on secured debts (such as a car loan or mortgage), to meet your repayment obligations.

You must undergo credit counseling before you can file for bankruptcy. The credit counseling services check out whether debtors can pay at least 60% or more of their debts so that they don't have to file bankruptcy. Before you file, you must prepare a Chapter 13 plan based on your income and ability to make payments. You must make the payments according to the plan. If you default, your petition will be dismissed.

You must file a Chapter 13 petition in the bankruptcy court. The petition must be accompanied by the following documents:

1. Schedules of assets and liabilities;
2. Schedule of current income and expenditures;
3. Schedule of unfulfilled contracts and unexpired leases; and
4. Statement of financial affairs.

The petition must include the following information:             

1. A list of all creditors and the amounts and nature of their claims;
2. The source, amount, and frequency of the debtor's income;
3. A list of all of the debtor's property; and
4. A detailed list of the debtor's monthly living expenses including  food, clothing, shelter, utilities, taxes, transportation, medicine, and so on.

After the petition is filed, the Court will appoint an impartial trustee. The trustee will collect the payments from you and distribute the payments to the creditors. Your Chapter 13 plan must be approved by the creditors.

Talk to a Bankruptcy Lawyer before you make any plans regarding a chapter 13 bankruptcy case. Bankruptcy laws are complex and the process is best handled by a professional.